Market may take a hit as Mighty River sale attracts 'huge interest'

PM John Key is scheduled to release more information about the sale of the state-owned company after Cabinet meets today. Photo / Brett Phibbs

More details are due today of the NZX listing of Mighty River Power whose float could have a short-term hit on the broader market.

Analysts say investors typically sell out of other shares before such a big listing which is already attracting "huge interest" among sharebrokers' clients.

Any New Zealander with an Inland Revenue number will be eligible to buy shares, including children. Across the Tasman when Telstra was listed interest was so high some Australians not only applied for shares on behalf of their children and grandchildren but reportedly tried to buy them in the names of their pets.

Prime Minister John Key is scheduled to release more information about the sale of the state-owned company after Cabinet meets today.

Details will be outlined about pre-registration - a three to four week period in which the Government will gauge the level of interest in buying shares and those handling the float can ensure they have a sufficient logistical response.

The Government then assesses demand and if it goes ahead with the partial sale the offer document is assessed by the Financial Markets Authority and the NZX.

If the issue is given the green light by the regulators investors can apply to buy shares through brokers or directly through the ASB and ANZ banks.

The offer document will have a price range and the final price is set during a two-day bookbuild period, after applications from the general public close.

The Government has already said the minimum share parcel will be $1000 and parcels of up to $2000 will not be scaled back. It has pledged that between 85 per cent and 90 per cent will be held by New Zealanders, including its own 51 per cent stake.

Reports have resurfaced that Mighty River Power would join other big New Zealand companies with a dual listing on the ASX. Last July Key said work was being done on that as some Australian fund managers who act on behalf of New Zealand investors could trade shares only if a company is listed on the Australian exchange.

Grant Williamson, a director at Hamilton Hindin Greene, said while he hoped for as much New Zealand investor ownership as possible, foreign institutions could help sustain the share price.

"If a number of institutions whether local or foreign were short-changed in the IPO [initial public offer] then they've got to buy on market which would create a very healthy secondary market. With IPOs what you've got to ensure is that you have a strong secondary market after they list with demand out there."

He said there was huge interest among clients from mum and dad investors to high net worth individuals willing to invest sums into the millions of dollars

"It is large and obviously there's a lot of money chasing very limited investments at the time. We have a large number of clients who have allocated funds ready for Mighty River and have been doing that for the last few months."

Investors and advisers would have to make sure the fundamentals stacked up but "you'd have to think the government's advisers will ensure that it is attractive enough to warrant demand".

The sharemarket could take a breather. "Closer to listing investors will look to reallocate funds so we could see a bit of weakness on the local market as investors do a bit of selling to raise funds for Mighty River," said Williamson.

Craigs Investment Partners head of private wealth research Mark Lister said having risen nearly 78 per cent since March 2009, the NZX50 is about 1 per cent per cent away from hitting its all-time high from May 2007. However, money in some shares would be redeployed. "If there were no IPOs our market would probably have a better run this year, with IPOs - it's supply and demand, money chasing opportunities. I don't think a few new IPOs will put a spanner in the works."